The capital market plays a significant role in the national economy. A developed, dynamic and vibrant capital market can contribute significantly in the economic growth and development. It mobilizes funds from people for further investments in the productive channels of an economy, activating idle monetary resources and putting them in proper investments. Capital market also helps in capital formation. Through mobilization of ideal resources it generates savings; the mobilized savings are made available to various segments such as agriculture, industry, etc. This raises resources for longer periods of time. Thus it provides an investment avenue for people who wish to invest resources for a longer period of time. The study sought to investigate the factors influencing the performance of capital markets. The study was carried out in Nairobi and target population included Nairobi Securities Exchange (NSE) member firms, Capital Markets Authority (CMA) and listed firms. This study focused on these groups as they are the core functional players in the capital markets. This was descriptive study that utilized a descriptive survey approach; the data obtained was coded using numerals in order to put them in limited number of categories. The study revealed a positive correlation between Policies and regulations of CMA and corporate governance. Incentives to Chief Executive Officers (CEOs) and portfolio diversification were also positively correlated. The findings further indicated negative correlation between Policies and Regulations of CMA and the performance of capital. However, the findings revealed that portfolio diversification and corporate governance are positively correlated. The study also found that when the Policies and Regulations of CMA increase the corporate governance and thus performance improves.

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